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Problem 21-1 Valuation The Adjusted Present Value (APV) Approach Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7%. Assume that the risk-free rate of interest is 7% and the market risk premium is 8%. Both Vandell and Hastings face a 30% tax rate. Vandell's free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 6% a year; its beta is 1.10. What is the value of Vandell's operations? (Hint: Use the corporate valuation model.) Round your answer to the nearest cent. $ million If Vandell has $11.80 million in debt, what is the current value of Vandell's stock? (Hint: Use the corporate valuation model.) Round your answer to the nearest cent. $ /share

Paper#6987 | Written in 18-Jul-2015

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